Heating oil declined amid concern that Europe’s debt crisis will hinder economic growth and curb fuel demand.
Futures sank as the dollar strengthened and equities dropped after the cost of insuring against defaults by Portugal, Spain and Ireland rose to records. The U.S. currency advanced as much as 1.2 percent to a two-month high against its European counterpart, reducing the investment appeal of dollar-denominated commodities. The Standard & Poor’s 500 Index fell 0.8 percent at 1:46 p.m. in New York.
“The dollar is up and everything else is getting pounded because of the European debt situation,” said Tom Knight, vice president of trading and supply at Truman Arnold Cos. in Texarkana, Texas.
Heating oil for December delivery slipped 0.93 cent, or 0.4 percent, to settle at $2.3162 a gallon on the New York Mercantile Exchange, which closed floor trading at 1:30 p.m. local time. The more actively traded January contract sank 0.88 cent to $2.333. There was no floor trading yesterday for the U.S. Thanksgiving holiday.
The crack spread between oil and the fuel narrowed 27 cents to $14.23 a gallon.
The Energy Department reported Nov. 24 that stockpiles of distillates, which include heating oil and diesel, fell 541,000 barrels last week to 158.3 million, the lowest level since June 18. Inventories are 5.2 percent below a year earlier and 15 percent above the five-year average for the period.
The dollar rose 0.9 percent to $1.3234 against the euro at 2:09 p.m. in New York, from $1.336 yesterday.
The dollar has also been supported by escalating tensions on the Korean Peninsula, said Gordon Elliott, a risk management specialist at FC Stone LLC in St. Louis Park, Minnesota.
North Korea on Nov. 23 shelled a South Korean fishing community and military base, killing four people. President Barack Obama dispatched the USS George Washington to take part in military drills scheduled between Nov. 28 and Dec. 1 in the Yellow Sea off the western coast of the Korean peninsula.
“If there is action over there the U.S. dollar should stand pretty firm,” reducing the appeal of commodities as a hedge against inflation, Elliott said.
Gasoline for December delivery dropped 0.33 cent to $2.2103 a gallon, while the more actively traded January contract slipped 0.34 cent to $2.1584. The premium of gasoline over crude oil, or the crack spread, based on January contracts, narrowed 5 cents to $6.89 a barrel.
There’s some “backtracking” from the rally before the Thanksgiving holiday that hinged on a drop in jobless claims, Knight said. The gain happened while fundamentals for the fuel were poor, he said. Gasoline prices rose 3.7 percent Nov. 24.
U.S. gasoline stockpiles rose 1.91 million barrels to 209.6 million last week, the first increase in five weeks. Supplies are 4 percent above the five-year average for the period.
Demand for the fuel fell 1.4 percent to a six-week low of 8.83 million barrels a day. Consumption, averaged over four weeks, was up down 0.3 percent from a year earlier.
Regular gasoline at the pump, averaged nationwide, fell 0.2 cent to $2.863 a gallon yesterday, AAA said on its website.